EXHIBIT 10.1
HOME PROPERTIES OF NEW YORK, INC.,
HOME PROPERTIES OF NEW YORK, L.P.,
AND
THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
AND
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA
SERIES E CONVERTIBLE CUMULATIVE PREFERRED STOCK
PURCHASE AGREEMENT
Dated as of December 22, 2000
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PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated as of December 22, 2000, by and among HOME
PROPERTIES OF NEW YORK, INC., a Maryland corporation (the "COMPANY"), HOME
PROPERTIES OF NEW YORK, L.P., a New York limited partnership (the "OPERATING
PARTNERSHIP"), and The Prudential Insurance Company of America, a New Jersey
mutual insurance company ("Prudential") and Teachers Insurance and Annuity
Association of America, a New York insurance company ("TIAA") (each of
Prudential and TIAA a "Purchaser", and, collectively, the "Purchasers").
W I T N E S S E T H :
WHEREAS, the Company desires to issue and sell to the Purchasers,
and the Purchasers desire to severally purchase from the Company, 300,000
shares of Series E Convertible Cumulative Preferred Stock, par value $0.01 per
share (the "SHARES"), of the Company, having the terms and conditions set forth
in the Articles Supplementary to the Amended and Restated Articles of
Incorporation (the "ARTICLES") of the Company, in the form set forth in
EXHIBIT A hereto (the "SERIES E ARTICLES SUPPLEMENTARY"), in accordance with
and subject to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the representations, warranties
and agreements herein contained, the parties hereto agree as follows:
Section 1.SALE AND PURCHASE. In reliance upon the representations
and warranties contained herein and subject to the terms and conditions hereof,
on the Closing Date (which is the date hereof), the Company agrees to sell to
the Purchasers, and each Purchaser severally agrees to purchase, the Shares, in
the amount of 100,000 shares for Prudential and 200,000 shares for TIAA . The
Company has adopted and filed with the State Department of Assessments and
Taxation of Maryland (the "SDAT"), and the SDAT has accepted for filing, on or
before the Closing the Series E Articles Supplementary.
Section 2. CLOSING.
2.01. PLACE AND DATE. The closing of the sale and purchase of
the Shares (the "CLOSING" or the "Closing Date") is taking place on the 22nd
day of December, 2000 at the offices of Clifford Chance Rogers & Wells, LLP,
200 Park Avenue, New York, New York 10166.
2.02. PURCHASE OF SHARES; PAYMENT OF PURCHASE PRICE. At the
Closing, the Purchasers will severally purchase, and the Company will sell to
the Purchasers, the Shares, at a per Share cash price of $100.00, resulting in
an aggregate cash purchase price of $30,000,000 (the "PURCHASE PRICE"). At the
Closing, each Purchaser will deliver cash for the shares purchased by them by
wire transfer in immediately available funds in full payment for the Shares
being purchased by such Purchaser, and the Company will deliver to each such
Purchaser certificates representing the Shares in the names and in the
denominations requested by each Purchaser. The obligation of each Purchaser to
purchase Shares under this Agreement is several and not joint, and no Purchaser
shall have any obligation or liability under this Agreement for any other
Purchaser or for the performance or non-performance by any other Purchaser
under this Agreement.
2.03. CLOSING DELIVERIES. At the Closing the following
conditions are to be performed to the satisfaction of each Purchaser (unless
waived by each Purchaser in its sole and absolute discretion) prior to the
Purchasers becoming severally obligated hereunder to fund their allocable
portion of the Purchase Price:
(a) the Company will deliver Shares which have been fully
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT")
and under such state securities laws which require such registration (together
with the Securities Act, "SECURITIES LAWS"), and which will be convertible into
shares of Common Stock which have been fully registered under the Securities
Laws, which Shares and Common Stock will be freely transferable upon
acquisition by any Holder;
(b) Nixon Peabody, LLP, counsel for the Company, will deliver
to each of the Purchasers an opinion with respect to the Company's status as a
real estate investment trust in the form of EXHIBIT B hereto;
(c) Nixon Peabody, LLP, counsel for the Company, will deliver
to each of the Purchasers an opinion in the form of EXHIBIT C hereto;
(d) the general counsel of the Company will deliver to each of
the Purchasers an opinion in the form of EXHIBIT D hereto;
(e) the Company will deliver to each of the Purchasers a waiver
of the ownership limitations set forth in the Articles in the form of EXHIBIT E
hereto; (the "OWNERSHIP WAIVER"); and
(f) the Operating Partnership will deliver to the Company an
amendment to the Operating Partnership's Second Amended and Restated Agreement
of Limited Partnership (the "L.P. AGREEMENT") establishing a series of
preferred units (the "UNITS") of the Operating Partnership in the form of
EXHIBIT F hereto (the "OP AMENDMENT");
(g) The Company will cause to be delivered to the Purchasers a
letter from Fitch IBCA, Duff & Phelps Credit Rating Co. confirming the rating
of the Shares as not less than BBB- (the "RATING LETTER") in the form of
EXHIBIT G hereto;
(h) The Company will deliver to each of the Purchasers an
officers' certificate in the form of EXHIBIT H hereto with appropriate
schedules (the "OFFICERS' CERTIFICATE") and such other documents, certificates
and opinions as the Purchasers may reasonably request;
(i) The Company will deliver warrants in the form of EXHIBIT I
hereto to purchase 267,900 shares of the Company's Common Stock to Prudential
Investment Management Services LLC ("PIMS")and warrants to purchase 17,100
shares of the Company's Common Stock to Teachers Insurance and Annuity
Association as an inducement to enter into and perform under this Agreement
(collectively the "Warrants");
(j) On the date of the Closing, the purchase of the Shares by
each Purchaser shall: (i) be permitted by the laws and regulations of each
jurisdiction to which the applicable Purchaser is subject, without recourse to
provisions (such as Section 1405(a)(8) of the New York Insurance Law)
permitting limited investments by insurance companies without restriction as to
the character of the particular investment; (ii) not violate any applicable law
or regulation; and (iii) not subject the applicable Purchaser to any tax,
penalty or liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect prior to the date hereof. If
requested by the Purchasers, the Purchasers shall have received an Officer's
Certificate certifying as to such matters of fact as the Purchasers may
reasonably specify to enable the Purchasers to determine whether such purchase
is so permitted.
2.04 Expenses. At the Closing, the Company shall pay or cause
to be paid all of the Purchasers' actual third party due diligence expenses and
outside legal and consulting fees in connection with the transaction
contemplated hereby, not to exceed $25,000 in the aggregate. Prudential shall
furnish the Company with supporting documentation, in reasonable detail, for
such expenses.
Section 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
OPERATING Partnership. The Company and the Operating Partnership, jointly and
severally, represent, warrant and covenant to each Purchaser as of the date
hereof and as of the Closing Date as follows:
3.01. STATUS; POWER AND AUTHORITY.
(a) Each of the Company and the Operating Partnership is a
corporation or partnership duly organized, validly existing and (in the case of
the Company) in good standing under the laws of its state of organization and
has all requisite power and authority to enter into and perform its obligations
under each of the Transaction Documents (as defined below) to which it is a
party and to consummate the transactions contemplated hereby and thereby,
including the issuance of the Shares, and to own, lease and operate its
properties and conduct its business as now being conducted or proposed to be
conducted as described in the Exchange Act Reports (as defined below), and is
duly qualified or registered to transact business and is in good standing under
the laws of each other jurisdiction in which its owns or leases properties, or
conducts any business, so as to require such qualification or registration,
except where the failure to do so would not reasonably be expected to have a
Material Adverse Effect (as defined below).
(b) The Subsidiaries (as defined below) are listed on SCHEDULE
3.1(B) and have each been duly organized and are validly existing and in good
standing under the laws of their respective jurisdictions of incorporation or
formation and have all requisite power and authority to own, lease and operate
their properties and to conduct their businesses as now being conducted or
proposed to be conducted as described in the Exchange Act Reports, and each
Subsidiary is duly qualified or registered to transact business and is in good
standing under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such qualification or
registration, except where the failure to be in good standing or to so qualify
or register would not reasonably be expected to have a Material Adverse Effect.
(c) As used in this Agreement, "SUBSIDIARIES" means any entities
that would be treated as consolidated subsidiaries of the Company or the
Operating Partnership for financial accounting purposes under generally
accepted accounting principles ("GAAP") as applied in the United States
including, without limitation, the entities listed on SCHEDULE 3.1(B).
(d) As used in this Agreement, "MATERIAL ADVERSE EFFECT" means
any event, circumstance or condition that has or is reasonably expected to have
a material adverse effect on the business, assets, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company, the
Operating Partnership and the Subsidiaries taken as a whole or that would
materially impair the Company's or the Operating Partnership's ability to
perform its obligations under, or otherwise affect the enforceability or
validity of, the Transaction Documents.
(e) As used in this Agreement, "TRANSACTION DOCUMENTS" means
each of this Agreement, the Series E Articles Supplementary, the OP Amendment,
the Warrants and the Ownership Waiver.
3.02. NO MATERIAL VIOLATION OR CONFLICT. The execution and
delivery by the Company and the Operating Partnership of each of the
Transaction Documents to which it is a party and the consummation of the
transactions contemplated herein and therein (including the sale and delivery
of the Shares and the issuance of the Warrants) will not conflict with or
result in a breach or violation by the Company or the Operating Partnership
of, or constitute a default, or an event which with notice or passage of time
or both could become a default, by the Company or the Operating Partnership
under or result in the creation of any lien, security interest or encumbrance
upon the stock or assets of the Company, the Operating Partnership or any of
the Subsidiaries or, as to clause (ii) below, impose any additional monetary
obligations on the Company, the Operating Partnership, or any Subsidiary under,
or modify the contractual obligations of any party under, or give rise to any
right of termination, amendment, acceleration or cancellation under, (i) the
Articles or the by-laws of the Company or the L.P. Agreement, (ii) any
contract, agreement or instrument to which the Company, the Operating
Partnership or any of the Subsidiaries is a party or by which the Company, the
Operating Partnership or any of the Subsidiaries is bound or to which any of
their properties are subject or (iii) any existing applicable law, rule,
published regulation, judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over the Company, the Operating
Partnership or any of the Subsidiaries or any of their properties or assets,
except, in the case of clauses (ii) and (iii), for such conflicts, breaches,
defaults, liens, security interests or encumbrances upon the stock or assets of
the Company, the Operating Partnership or any of the Subsidiaries, or
imposition of additional monetary obligations which, in the aggregate, would
not reasonably be expected to have a Material Adverse Effect.
3.03. NO MATERIAL DEFAULT. (a) None of the Company, the
Operating Partnership or the Subsidiaries is in default in the performance,
observance or fulfillment of any obligation, covenant or condition contained in
any agreement, contract, commitment, instrument, plan or undertaking
(including, without limitation, any and all leases, mortgages, and other
contractual arrangements with respect to real property) material to the
business of the Company, the Operating Partnership and the Subsidiaries taken
as a whole (collectively, the "CONTRACTS") and (b) no event has occurred which,
with or without the giving of notice or lapse of time or both, would constitute
or result in a default thereunder except, in the case of each of (a) and (b),
for such defaults or events as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each of the
Contracts is valid and enforceable in accordance with its terms except to the
extent that enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws now or
hereafter in effect relating to creditors' rights generally and (ii) general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity) and except for those failures of Contracts (or
provisions thereof) to be valid or enforceable which would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect. None of
the Company's bonds, debentures, notes or other evidences of indebtedness are
in default as to principal or interest, as of the date hereof.
3.04. SHARES. The Company has all requisite corporate right,
power and authority to issue, sell, and deliver the Shares and the Warrants as
contemplated by this Agreement; the Shares and the issuance of the Warrants
have been duly authorized, and upon such issuance, sale and delivery, and
payment of the Purchase Price therefor as contemplated by this Agreement and
the Warrants, the Purchasers will receive good and valid title to the Shares
and the recipients of Warrants will receive good title to the Warrants, free
and clear of any pledge, lien, security interest, charge, claim, equity or
encumbrance of any kind and such Shares and the Warrants will be fully paid and
non-assessable, not subject to any preemptive rights and will have been issued
and sold in compliance with all applicable Federal, State and local laws. The
shares of Common Stock, par value $.01, of the Company (the "COMMON STOCK")
issuable upon conversion of the Shares and the exercise of the Warrants have
been duly authorized and have been reserved for such purpose. Upon such
conversion or exercise, the Purchasers, with respect to the Shares, and
recipients of the Warrants, with respect to the Warrants, will receive the
appropriate number of shares of Common Stock free and clear of any pledge,
lien, security interest, charge, claim, equity or encumbrance of any kind
created or permitted to exist by the Company and such shares of Common Stock
will be fully paid and nonassessable, not subject to any preemptive rights and
will have been issued and sold in compliance with all applicable Federal, State
and local laws. The form of certificates evidencing the Shares and the
Warrants, and upon conversion or exercise thereof, the Common Stock, will
comply with all applicable legal requirements and the rules of the New York
Stock Exchange ("NYSE") and with all applicable requirements of the Articles
and By-laws of the Company (the "BYLAWS").
3.05. OBLIGATIONS BINDING. The execution and delivery of each
of the Transaction Documents by the Company and the Operating Partnership, the
issuance of the Shares and the Warrants, and the issuance of the Common Stock
upon the conversion or exercise thereof and the consummation of the
transactions contemplated thereby have been duly authorized by the Company's
Board of Directors, and no further consent or authorization of the Company, its
Board of Directors, Shareholders, the Operating Partnership, its limited
partners, any governmental authority (except with respect to the filing of the
Series E Articles Supplementary) or any other third party is required for such
execution, delivery, issuance or consummation. Each of the Transaction
Documents to which it is a party has been duly executed and delivered by the
Company or the Operating Partnership, as the case may be, and constitutes the
legal, valid and binding obligation of the Company or the Operating
Partnership, as the case may be, enforceable against it in accordance with its
terms, except as may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally, and (ii) equitable principles of
general applicability relating to the availability of specific performance,
injunctive relief or other equitable remedies.
3.06. INVESTMENT COMPANY. Neither the Company nor the
Operating Partnership is required to register as an "investment company" and,
to the knowledge of the Company and the Operating Partnership, neither is
directly nor indirectly controlled by any person which is required to register
as an "investment company," within the meaning of and under the Investment
Company Act of 1940 as amended, (the "1940 ACT"), and the transactions
contemplated by the Transaction Documents will not cause the Company or the
Operating Partnership to become an "investment company" subject to
registration under the 1940 Act.
3.07. REIT STATUS. The Company is and has been, commencing with
the Company's taxable year ended 1994, and upon the sale of the Shares and
Warrants will continue to be, organized and operated in conformity with the
requirements for qualification and taxation as a real estate investment trust
("REIT") under Sections 856 through 860 of the U.S. Internal Revenue Code of
1986, as amended (the "CODE"), and the present and contemplated method of
operation, assets and income of the Company, the Operating Partnership and the
Subsidiaries do and will enable the Company to meet the requirements for
qualification and taxation as a REIT under the Code for the taxable year ending
December 31, 2000, and in the future. The Company is not currently a "pension
-held REIT" within the meaning of Code Section 856(h)(3)(D) and the Treasury
Regulations promulgated thereunder.
3.08. CAPITALIZATION.
(a) The authorized capital stock of the Company as of December
19, 2000 consists of 80,000,000 shares of Common Stock, of which, as of the
date of this Agreement, 21,388,923.89 shares were issued and outstanding,
10,000,000 shares of excess stock, par value $0.01 per share, none of which is
outstanding, and 10,000,000 shares of Preferred Stock, par value $0.01 per
share, 1,666,667 shares of which are issued and outstanding as the Company's
Series A Senior Convertible Preferred Stock, 2,000,000 of which are issued and
outstanding as the Company's Series B Convertible Cumulative Preferred Stock,
600,000 of which are issued and outstanding as the Company's Series C
Convertible Cumulative Preferred Stock and 250,000 of which are outstanding as
the Company's Series D Convertible Cumulative Preferred Stock. All of the
issued and outstanding shares of capital stock of the Company have been duly
and validly authorized and issued, are fully paid and nonassessable and are
free from preemptive rights assessable, and have been issued and sold in
compliance with all applicable Federal, State and local laws.
(b) As of September 30, 2000, the outstanding partnership
interests in the Operating Partnership consist of a general partnership
interest held by the Company representing a 1.00% interest in the Operating
Partnership, 20,850,545.82 common units held by Home Properties Trust, a
Maryland real estate investment trust and a wholly owned subsidiary of the
Company, representing in the aggregate a 49.94345% interest in the Operating
Partnership, 15,963,612 common units representing in the aggregate a 38.23775%
interest in the Operating Partnership, one Class A Limited Partnership Interest
with a stated value of $35,000,000 (the "CLASS A INTEREST"), 2,000,000 units of
Class B limited partnership interests (the "CLASS B INTEREST"), 600,000 units
of Class C limited partnership interests (the "Class C Interest") and 250,000
units of Class D limited partnership interests (the "CLASS D INTEREST").
(c) Except as set forth on SCHEDULE 3.8, there are no
outstanding options, warrants, rights or other securities exercisable for,
exchangeable for or convertible into equity securities of the Company or the
Operating Partnership.
(d) There are no antidilution or price adjustment provisions
contained in any security issued by the Company or the Operating Partnership
(or in any agreement providing rights to any security holder of the Company or
Operating Partnership) that will be triggered by the issuance of the Shares or
the Warrants or the exercise of any conversion privilege in respect thereto.
The Company and the Operating Partnership are not parties to and do not have
any knowledge of, any agreement with respect to voting of either of their
securities.
3.09 REGISTRATION. The Shares, the Warrants and the shares of
Common Stock issuable upon the conversion or exercise of the foregoing have
been registered under the Securities Act of 1933, as amended (the "SECURITIES
ACT") and any applicable state securities and local law, and are freely
tradable. No further registration or qualification of such Shares, Warrants or
shares of Common Stock under any securities laws is required in connection with
the offer, sale and delivery of the Shares, Warrants or shares of Common Stock
in the manner contemplated in this Agreement.
3.10 FINANCIAL STATEMENTS. The financial statements and
supporting schedules included in the Company's periodic filings filed pursuant
to the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), are
complete and correct in all material respects, are materially consistent with
the books and records of the Company, the Operating Partnership and the
Subsidiaries, comply as to form in all material respects with applicable
accounting requirements and to the rules and regulations of the Securities and
Exchange Commission with respect thereto, and present fairly in all material
respects the consolidated financial position of the Company, the Operating
Partnership and the Subsidiaries as of the dates specified (subject to normal
year-end audit adjustments in the case of unaudited interim financial
statements) and the consolidated results of their operations and cash flows for
the periods specified (subject to normal year-end audit adjustments in the case
of unaudited interim financial statements); such financial statements,
including the related schedules and notes thereto, were prepared in conformity
with GAAP on a consistent basis during the periods involved, except as
indicated therein or in the notes thereto. The historical financial information
and property information provided by the Company to the Purchasers and the
information contained in the Company's press release, dated October 26, 2000
with respect to its third quarter financial results is true and correct, in all
material respects, and accurately sets forth the financial results of the
properties set forth therein. Such information, together with the Company's
and the Operating Partnership's periodic filings pursuant to the Exchange Act,
which filings include but are not limited to the Company's Annual Report on
Form 10-K filed on March 30, 2000, the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 2000, Registration Statement on
Form S-3 filed on January 18, 2000, Proxy Statement on form DEF 14A dated
March 29, 2000 and Current Reports on Form 8-K dated October 26, 2000, December
1, 2000 and December 5, 2000 (collectively, the "EXCHANGE ACT REPORTS"), do not
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading. Neither the
Company, the Operating Partnership nor any of the Subsidiaries has any material
liability (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due), other than: (i) liabilities disclosed in the
Exchange Act Reports , (ii) liabilities which have arisen after the date of the
last Exchange Act Report in the ordinary course of business, including those
set forth on SCHEDULE 3.10, and (iii) liabilities which could not reasonably be
expected to have a Material Adverse Effect. The Prospectus Supplement filed
by the Company to effect the registration of the Shares and Warrants and the
Common Stock issuable upon the exercise or conversion thereof does not contain
an untrue statement of fact or omit to state a material fact necessary in order
to make the statements made, in light of the circumstances under which they
were made, not misleading.
3.11 EXCHANGE ACT COMPLIANCE. The Company has timely filed all
documents required to be filed with the Securities and Exchange Commission
pursuant to the Exchange Act and the rules and regulations thereunder. All
such documents, when so filed, complied in form and substance in all material
respects with the Exchange Act and did not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
3.12 NO MATERIAL ADVERSE CHANGES. Since December 31, 1999,
except as or as disclosed herein pursuant to SCHEDULE 3.10 to the Disclosure
Schedule: (i) there has been no event, circumstance or condition relating to
or affecting the business, assets, liabilities, results of operations,
condition (financial or otherwise) of the Company, the Operating Partnership
and the Subsidiaries taken as a whole, or the earnings or the ability to
continue to conduct business in the usual and ordinary course of the Company,
the Operating Partnership and the Subsidiaries taken as a whole, whether or not
arising in the ordinary course of business, which would reasonably be expected
to have a Material Adverse Effect; and (ii) except for the transactions
contemplated by the Transaction Documents or as set forth in the Exchange Act
Reports, there has been no material transaction entered into by the Company,
the Operating Partnership or any of the Subsidiaries other than (a)
transactions in the ordinary course of business or (b) transactions which would
not reasonably be expected to have a Material Adverse Effect; and (iii) there
have not been any changes in the capital stock or any material increases in the
Indebtedness of the Company, the Operating Partnership or any of the
Subsidiaries or any increase in the regular dividend or the declaration or
payment of a special dividend on any security or interest of the Company, the
Operating Partnership or any of the Subsidiaries.
3.13 LITIGATION. There is no action, suit, investigation or
proceeding (whether or not purportedly on behalf of the Company, the Operating
Partnership or any of the Subsidiaries) before or by any court or governmental
agency or body, domestic or foreign, now pending or, to the best knowledge of
the Company or the Operating Partnership, threatened against or affecting the
Company, the Operating Partnership or any of the Subsidiaries, which in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
SCHEDULE 3.13 to the Disclosure Schedule hereto contains a complete list of
each action presently pending against the Company, the Operating Partnership or
any Subsidiary that is not covered by insurance procured by the Company, the
Operating Partnership or any Subsidiary, and a list of any judgment or
settlement made on behalf of any of the foregoing during the preceding 12
months other than under such insurance policies.
3.14 TITLE TO PROPERTIES; LEASEHOLD INTERESTS.
(a) Except for matters which individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect:
(i) the Company, the Operating Partnership or one or more of the Subsidiaries,
has good and marketable title to all real properties it owns free from
easements, liens, pledges, claims, charges, options, defects, preferential
purchase rights, rights of first refusal or other encumbrances and has good
title or an enforceable leasehold interest, license or other lawful right to
use all other assets that are used in the Company's, the Operating
Partnership's or one or more of the Subsidiaries' business substantially in the
manner in which they currently are operated, in each case, subject only to
Permitted Exceptions (as herein defined) and no notice has been issued alleging
any default in compliance with the terms and provisions of any of the
covenants, conditions, restrictions, rights-of-way or easements constituting
one or more of the Permitted Exceptions or alleging a violation of any zoning,
building, fire, health code or other applicable laws or regulations with
respect to the properties; (ii) all leases under which the Company, the
Operating Partnership or any of the Subsidiaries leases any property are in
full force and effect, and neither the Company, the Operating Partnership nor
any such Subsidiary is in default in any material respect of any of the terms
or provisions of any of such leases and to the Company's and the Operating
Partnership's knowledge no claim has been asserted by anyone adverse to any
such entity's rights as lessee under any of such leases, or affecting or
questioning any such entity's right to the continued possession or use of the
properties under any such leases or asserting a default under any such leases,
(iii) all liens, charges or encumbrances on or affecting any of the property
and assets of the Company, the Operating Partnership and the Subsidiaries which
are required to be disclosed in the Company's Exchange Act Reports are
disclosed therein; and (iv) there is no judicial, municipal or administrative
action, suit, arbitration, proceeding or investigation pending or threatened
against, relating to or affecting the Company, the Operating Partnership or any
Subsidiary, their assets or properties, before any court or Governmental
Authority (as defined below), including, without limitation, proceedings for or
involving collections, , alleged building code or environmental or zoning
violation, alleged to have occurred at any of the properties or by reason of
the condition, use of, or operations on any of the properties. While there may
be actions, suits and other proceedings pending or threatened against, relating
to or affecting the Company, the Operating Partnership or any Subsidiary
involving condemnation, eminent domain, personal injuries or property damage,
such matters are not reasonably expected to have a Material Adverse Effect.
( b) As used in this Agreement, "PERMITTED EXCEPTIONS" means:
(i) real estate taxes and assessments not yet due and payable; (ii) covenants,
restrictions, easements and other similar agreements, PROVIDED, that the same
are not violated by existing improvements or the current or proposed use and
operation of the Company's, the Operating Partnership's or any Subsidiary's
property; (iii) zoning laws, ordinances and regulations, building codes, rules
and other governmental laws, regulations, rules and orders affecting any of the
Company's, the Operating Partnership's or any Subsidiary's property, PROVIDED,
that the same are not violated by existing improvements or the current or
proposed use and operation of such property; (iv) any imperfection of title
which does not materially and adversely affect the current or proposed use,
operation or enjoyment of any of the Company's, the Operating Partnership's or
any Subsidiary's real property and does not render title to such real property
unmarketable or uninsurable and does not materially impair the value of such
property; and (v) mortgage financings which are disclosed in the Exchange Act
Reports or on Schedule 3.10 to the Disclosure Schedule.
3.15 ENVIRONMENTAL COMPLIANCE.
(a) Except for such matters which individually or in the
aggregate would not reasonably be expected to have a Material Adverse Effect,
the Company, the Operating Partnership and each of the Subsidiaries has
complied and is in compliance with all Environmental Laws (as hereinafter
defined).
(b) Except for such notices relating to matters which
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect, notice of violation or other written communication
has been received by the Company, the Operating Partnership or any of their
Subsidiaries from any Governmental Authority or any other entity or person,
alleging or suggesting an Environmental Law violation in respect of any
property owned by any of them.
(c) Neither the Company, the Operating Partnership nor any of
the Subsidiaries, nor any of their agents, licensees, invitees, tenants or any
other person or entity has used, will use or will permit to be used any real
property owned, leased or occupied by any such party for the purpose of
handling, storing, burying, retaining, refining, transporting, processing,
manufacturing, generating, producing, spilling, seeping, leaking, escaping,
leaching, pumping, pouring, emitting, emptying, discharging, injecting,
dumping, transferring or otherwise disposing of or dealing with Hazardous
Materials. Neither the Company, the Operating Partnership nor any of the
Subsidiaries will be deemed to be in breach of the foregoing with respect to
(i) maintenance and use of underground heating fuel oil tanks, provided such
maintenance and use is in full compliance with all applicable Environmental
Laws, and (ii) storage and use of cleaning solvents and other chemicals used in
the routine maintenance of the properties, provided such storage and use is in
full compliance with all applicable Environmental Laws.
(d) Except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, neither the Company,
the Operating Partnership nor any of the Subsidiaries is aware of (i) any
seepage, leak, escape, leach, discharge, injection, release, emission, spill,
pumping, pouring, emptying or dumping of Hazardous Materials into waters on or
adjacent to any real property owned, leased or occupied by any such party, or
onto lands from which Hazardous Materials might seep, flow or drain into such
waters; or (ii) the use of any nearby or adjacent property which would likely
create any liability on the part of the Company, the Operating Partnership or
any of their Subsidiaries under the Environmental Laws or that would require
reporting to or notification by the Company, the Operating Partnership, or any
of their Subsidiaries to any Governmental Authority
(e) Except as disclosed on SCHEDULE 3.13 to the Disclosure
Schedule, and such matters as would not reasonably be expected to have a
Material Adverse Effect, the Company and the Operating Partnership and the
Subsidiaries have no knowledge of any occurrence or circumstance that, with
notice or passage of time or both, would be likely to give rise to a claim
under or pursuant to any federal, state or local Environmental Law pertaining
to Hazardous Materials on or originating from any real property owned or
occupied by the Company, the Operating Partnership or any of the Subsidiaries.
(f) No land owned by the Company, the Operating Partnership or
any of the Subsidiaries is included or, to the actual knowledge of the Company,
proposed for inclusion on the National Priorities List issued pursuant to
CERCLA (as hereinafter defined) by the United States Environmental Protection
Agency (the "EPA") or on the inventory of other potential "Problem" sites
issued by the EPA and has not otherwise been publicly identified by the EPA as
a potential CERCLA site or included or proposed for inclusion on any list or
inventory issued pursuant to any other Environmental Law or issued by any other
Governmental Authority .
(g) As used herein, "HAZARDOUS MATERIALS" shall include without
limitation any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, toxic substances or related materials, asbestos or
any hazardous material as defined by any federal, state or local environmental
law, ordinance, rule or regulation, including without limitation the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended, 42 U.S.C. section 9601 ET SEQ. ("CERCLA"), the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. section 1801 ET
SEQ., the Resource Conservation and Recovery Act, as amended, 42 U.S.C.
section 9601 ET SEQ., the Emergency Planning and Community Right-to-
Know Act of 1986, 42 U.S.C. section 11001 ET SEQ., the Toxic
Substances Control Act, 15 U.S.C. section 2601 ET SEQ., the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. section 136 ET
SEQ., the Clean Air Act, 42 U.S.C. section 7401 ET SEQ., the Clean
Water Act (Federal Water Pollution Control Act), 33 U.S.C.
section 1251 ET SEQ., the Safe Drinking Water Act, 42 U.S.C.
section 300F to 300j-11, and the Occupational Safety and Health Act,
29 U.S.C. section 651 ET SEQ., as any of the above statutes may be
amended from time to time, and in the regulations adopted and publications
promulgated pursuant to each of the foregoing and any other rules, ordinances,
codes, licenses, statutes, regulations, permits, orders, approvals, plans,
authorizations, concessions and similar items of all Governmental Authorities
and all applicable, judicial, administrative and regulatory decrees, judgments
and orders, any of which relate to the protection of human health or the
environment from the effects of Hazardous Materials (collectively,
"ENVIRONMENTAL LAWS") or by any federal, state or local governmental authority
having or claiming jurisdiction over the properties and assets of the Company,
the Operating Partnership and the Subsidiaries (a "GOVERNMENTAL AUTHORITY").
3.16 TAXES. The Company, the Operating Partnership and the
Subsidiaries have timely filed or filed for extensions of the filing period and
filed within such extended period all federal, state, local, foreign and other
tax returns, reports, information returns and statements (except for returns,
reports, information returns and statements the failure of which to timely file
would not reasonably be expected to result in any Material Adverse Effect)
required to be filed by them. The Company, the Operating Partnership and the
Subsidiaries have paid or caused to be paid all material taxes (including
interest and penalties) that are due and payable by the Company, the Operating
Partnership and the Subsidiaries (whether or not shown on such tax returns),
except those taxes which are being contested by the Company, the Operating
Partnership and the Subsidiaries in good faith by appropriate proceedings and
in respect of which adequate reserves are being maintained on the Company's,
the Operating Partnership's and the Subsidiaries' books in accordance with GAAP
consistently applied. The Company, the Operating Partnership and the
Subsidiaries do not have any material liabilities for taxes other than those
incurred in the ordinary course of business and in respect of which adequate
reserves are being maintained by the Company, the Operating Partnership and the
Subsidiaries in accordance with GAAP consistently applied. Except as set forth
on SCHEDULE 3.16 hereto, no federal, state, foreign, local or other tax
returns for the Company, the Operating Partnership and the Subsidiaries have
been audited by the Internal Revenue Service or other taxing authority. No
deficiency or assessment with respect to, or proposed adjustment of, the
Company's, the Operating Partnership's or any of the Subsidiaries' federal,
state, local, foreign or other tax returns is pending or, to the best of the
Company's and the Operating Partnership's knowledge, threatened. There is no
tax lien, whether imposed by any federal, state, local or other tax authority,
outstanding against the assets, properties or business of the Company, the
Operating Partnership, or any Subsidiary. There are no applicable taxes, fees
or other governmental charges payable by the Company, the Operating Partnership
or any of the Subsidiaries in connection with the execution and delivery of
Transaction Documents or the issuance to the Purchasers by the Company of the
Shares, the Warrants, or the shares of Common Stock issuable upon conversion or
exercise thereof other than filing fees and/or taxes related to the filing of
the Series C Articles Supplementary and any fees and charges in connection with
the registration of the Shares, the Warrants and the Common Stock.
3.17 INSURANCE. The Company, the Operating Partnership and the
Subsidiaries each carry or are entitled to the benefits of insurance from
financially sound and reputable insurers in such amounts and covering such
risks as is reasonably sufficient under the circumstances or is customary in
the industry and all such insurance is in full force and effect. SCHEDULE 3.17
to the Disclosed Schedule sets forth a summary of all such insurance coverage.
3.18 EMPLOYEES, ERISA. The Company, the Operating Partnership
and the Subsidiaries have good relationships with their employees and have not
had any substantial labor problems that would reasonably be expected to have a
Material Adverse Effect. There is no strike or work stoppage existing or, to
the knowledge of the Company and the Operating Partnership, threatened against
the Company, the Operating Partnership or the Subsidiaries. The Company and
the Operating Partnership do not have any knowledge as to any intentions of any
key employee or any group of employees to leave the employ of the Company, the
Operating Partnership or any Subsidiary where such departure would reasonably
be expected to have a Material Adverse Effect. Other than as disclosed in any
Exchange Act Report and on SCHEDULE 3.18 to the Disclosure Schedule, the
Company, the Operating Partnership and the Subsidiaries have not established,
sponsored, maintained, made any contributions to or been obligated by law to
establish, maintain, sponsor or make any contributions to any "employee pension
benefit plan" or any material "employee welfare benefit plan" (as such terms
are defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), including, without limitation, any "multi-employer plan," or any
other program, plan, or policy which provided payouts, benefits or
reimbursements to employees (collectively, "BENEFIT PLANS") except where the
liabilities associated with such Benefit Plan or Plans would not reasonably be
expected to have a Material Adverse Effect. The Company, the Operating
Partnership, the Subsidiaries and each Benefit Plan are in compliance with all
applicable laws relating to the employment of labor, including bargaining and
the payment of social security and other taxes, and with ERISA, except where
the failure to so comply would not reasonably be expected to have a Material
Adverse Effect. There is no material suit, action, dispute, claim,
arbitration, or legal, administrative or other proceeding or governmental
investigation pending, or threatened, alleging any breach of the terms of any
Benefit Plan or of any fiduciary duties thereunder or violation of any
applicable statute, law, rule or regulation with respect to any Benefit Plan.
No Benefit Plan is or has ever been subject to Title IV of ERISA or Section 412
of the Code.
3.19 GOVERNMENTAL AND OTHER CONSENTS. Other than such consents
as have been obtained and filings under applicable federal and state securities
laws , which the Company has obtained, and the filing of the Series E Articles
Supplementary, no consent, approval or authorization of, or declaration or
filing with, any Governmental Authority or third party on the part of the
Company or the Operating Partnership is required for the valid execution,
delivery or performance of any of the Transaction Documents or the valid offer,
issuance, sale and delivery of the Shares and the Warrants (or shares of Common
Stock issuable upon conversion or exercise thereof).
3.20 LEGAL COMPLIANCE. Except as disclosed in any Exchange Act
Reports, the Company, the Operating Partnership and the Subsidiaries are in
compliance with all applicable laws, rules, regulations, orders, licenses,
judgments, writs, injunctions, decrees or demands, except to the extent that
failure to comply would not reasonably be expected to have a Material Adverse
Effect. The properties are being used (and the improvements thereon have been
constructed) in accordance with all applicable zoning and building codes and
ordinances. The Company, the Operating Partnership and the Subsidiaries have
all necessary permits, licenses and other authorizations required to conduct
their businesses as currently conducted, and as proposed to be conducted,
except where a failure to have such permits, licenses or other authorizations
would not reasonably be expected to have a Material Adverse Effect. Neither
the Company, the Operating Partnership nor any Subsidiary has violated any
domestic or foreign law or any regulation or requirement, which violation has
or could be reasonably likely to have a Material Adverse Effect, and neither
the Company, the Operating Partnership nor any Subsidiary has received notice
of any such violation. There are no adverse orders, judgments, writs,
injunctions, decrees or demands of any court or administrative body, domestic
or foreign, or of any other governmental agency or instrumentality, domestic or
foreign, outstanding against the Company, the Operating Partnership or the
Subsidiaries which could reasonably be expected to have a Material Adverse
Effect.
3.21 BROKERS FEES; EXPENSES. Other than PIMS and Mercury
Partners, LLC the Company has not dealt with any broker, finder, commission
agent or other person in connection with the placement of the Shares or the
Warrants, and is not obligated to pay any broker's fee or commission in
connection therewith. Except for Mercury Partners LLC and PIMS, the Company
is not obligated to pay any fees or reimburse any expenses to any other party.
3.22 AFFILIATE TRANSACTIONS. Except as set forth on Schedule
3.22 to the Disclosure Schedule or as disclosed in the Exchange Act Reports,
neither the Company nor the Operating Partnership has any transactions required
to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the
Securities and Exchange Commission with any director or executive officers of
the Company.
3.23 DISCLOSURE. The Company has provided the Purchasers with
the information attached hereto as SCHEDULE 3.23 to the Disclosure Schedule
(the "Investment Summary"). Neither this Agreement, the Transaction Documents,
the Investment Summary, or any exhibit or schedule hereto or thereto nor any
other statements made or certificates delivered in connection with the issuance
of the Shares or the Warrants, contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statements herein or
therein, in light of the circumstances under which they were made, not
misleading, provided that any forward looking information contained in the
Investment Summary is based on the reasonable assumptions of the Company's
management and the Company is not hereby making any representation that its
expectations will be achieved.
3.24 DIVIDENDS. Other than the dividend payment priorities
established in connection with the issuance of the Company's Series A Senior
Convertible Preferred Stock, the Series B Cumulative Preferred Stock, the
Series C Cumulative Preferred Stock, the Series D Cumulative Preferred Stock
and as set forth in the Series E Articles Supplementary and in the Credit
Agreement between the Operating Partnership and Manufacturers and Traders Trust
Company, as amended, there are no agreements that restrict the right of the
Company to declare and pay dividends on its capital stock.
Section 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
Section Each Purchaser severally represents, warrants and
covenants to the Company and the Operating Partnership as of the date hereof
and as of the Closing Date as follows:
4.01 OWNERSHIP LIMITATIONS. Such Purchaser has received a copy
of the Articles, and understands and is and will be in compliance with the
restrictions on transfer and ownership of the Company's capital stock included
therein as modified by the Ownership Waiver.
4.02 AGREEMENT. This Agreement has been duly authorized by
all necessary action on the part of such Purchaser, and this Agreement has been
duly executed and delivered by such Purchaser and constitute the legal, valid
and binding obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms, except as such enforceability may be limited by:
(i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
other similar laws now or hereafter in effect relating to creditors' rights
generally; and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
Section 5. COVENANTS OF THE COMPANY.
5.01 FILING OF EXCHANGE ACT REPORTS. After the date of this
Agreement, the Company will timely file all documents required to be filed with
the Securities and Exchange Commission pursuant to Section 13 or 15 of the
Exchange Act and will use its best efforts to maintain its eligibility to use
Form S-3 under the Securities Act.
5.02 MAINTENANCE OF REIT STATUS. The Company will use its best
efforts to continue to qualify and be taxed as a real estate investment trust
pursuant to Sections 856 through 860 of the Code. The Company (i) will not
voluntarily terminate its status as a real estate investment trust, and (ii)
will promptly provide to each Purchaser all notices, correspondence or other
written communications received by the Company from the Internal Revenue
Service relating to the Company's and the Operating Partnership's status as a
real estate investment trust, subject to appropriate confidentiality
agreements.
5.03 NO PUBLIC DISCLOSURE. Neither the Company, the Operating
Partnership nor any affiliate of the Company or the Operating Partnership will
make any public disclosure concerning the transactions contemplated by this
Agreement unless such disclosure has been provided to each Purchaser at least
two (2) business days prior to such disclosure. Attached hereto as EXHIBIT J
is a copy of the press release that will be issued in connection with the
consummation of this transaction. Unless in the reasonable opinion of counsel
to the Company such disclosure is required by applicable law, neither the
Company, the Operating Partnership nor any affiliate of the Company or the
Operating Partnership will make any such public disclosure without the prior
written consent of each of the Purchasers. Once the Purchasers' prior consent
has been obtained with respect to a public disclosure, the same (or
substantially identical) disclosure may subsequently be disclosed by the
Company or the Operating Partnership without further approval by the
Purchasers.
5.04 SUBSEQUENT OPINIONS OF INDEPENDENT PUBLIC ACCOUNTANTS OR
INDEPENDENT COUNSEL. So long as any of the Shares remain issued and
outstanding, the Company shall provide the Purchasers with any opinions
regarding the Company's status as a real estate investment trust received from
the Company's independent public accountants or a nationally recognized law
firm in connection with any subsequent financings.
5.05 COMMON STOCK. The Company covenants and agrees that it
shall at all times reserve and keep available, free from preemptive rights, out
of the aggregate of its authorized but unissued shares of Common Stock solely
for the purpose of effecting conversion of the Shares or exercise of the
Warrants, the full number of shares of Common Stock as shall then be
deliverable upon the conversion of all outstanding Shares or exercise of all
Warrants not theretofore converted or exercised into Common Stock. Such shares
of Common Stock shall, when issued or delivered, be validly issued and fully
paid and non-assessable, registered under the Securities Act, not be subject to
any preemptive rights, be free and clear of all pledges, liens, security
interests charges, claims or other encumbrances of any kind and will have been
issued in compliance with all applicable laws.
5.06 LISTING. The Company covenants and agrees that it shall
cause the shares of Common Stock deliverable upon the conversion of the Shares
or exercise of the Warrants to be listed on the NYSE.
5.07 LIMITATIONS ON INDEBTEDNESS. The Company covenants and
agrees that, so long as any Shares remain outstanding, neither the Company, the
Operating Partnership nor any Subsidiary shall incur or suffer to exist any
Indebtedness that would result in the Company's ratio of consolidated
Indebtedness to Total Market Capitalization exceeding 70%. The Company will
provide each of the Purchasers with a certificate of its Chief Financial
Officer certifying the Company's, the Operating Partnership's and the
Subsidiaries' compliance with this Section 5.07 within forty-five (45) days
after each calendar quarter.
For the purposes of this Agreement:
(a)"INDEBTEDNESS" shall mean, without duplication on a
consolidated basis (i) all obligations of the Company, the Operating
Partnership or any Subsidiary for borrowed money, (ii) all obligations of the
Company, the Operating Partnership or any Subsidiary evidenced by bonds,
debentures, notes or similar instruments, (iii) all obligations of the Company,
the Operating Partnership or any Subsidiary under conditional sale or other
title retention agreements relating to property purchased by the Company, the
Operating Partnership or any Subsidiary, (iv) all obligations of the Company,
the Operating Partnership or any Subsidiary issued or assumed as the deferred
purchase price of property or services (other than accounts payable to
suppliers and similar accrued liabilities incurred in the ordinary course of
business and paid in a manner consistent with industry practice), (v) all other
obligations, contingent or otherwise, which, in accordance with GAAP, should be
classified on the Company's, the Operating Partnership's or any Subsidiary's
balance sheets as liabilities, whether or not so classified, (vi) all
liabilities secured by any mortgage, pledge, security interest, lien charge or
other encumbrance existing on any property or asset now owned by, or acquired
by, the Company, the Operating Partnership, or any Subsidiary, (vii) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any lien or
security interest on property owned or acquired by the Company, the Operating
Partnership or any Subsidiary whether or not the obligations secured thereby
have been assumed, (viii) all Capitalized Lease Obligations of the Company, the
Operating Partnership or any Subsidiary, (ix) all Guarantees of the Company,
the Operating Partnership or any Subsidiary, (x) all obligations (including but
not limited to reimbursement obligations) relating to the issuance of letters
of credit for the account of the Company, the Operating Partnership or any
Subsidiary, (xi) all obligations arising out of foreign exchange contracts, and
(xii) all obligations arising out of interest rate and currency swap
agreements, cap, floor and collar agreements, interest rate insurance, currency
spot and forward contracts and other agreements or arrangements designed to
provide protection against fluctuations in interest or currency exchange rates,
as valued in accordance with GAAP consistently applied.
(b) "GUARANTEES" of the Company, the Operating Partnership or
any Subsidiary shall mean (without duplication on a consolidated basis) all
obligations (other than endorsements in the ordinary course of business of
negotiable instruments for deposit or collection) of the Company, the Operating
Partnership or any Subsidiary guaranteeing, any Indebtedness, dividend or other
obligation of any other person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, all obligations incurred
through an agreement, contingent or otherwise, by the Company, the Operating
Partnership or any Subsidiary: (i) to purchase such Indebtedness or obligation
or any property or assets constituting security therefor, (ii) to advance or
supply funds: (x) for the purchase or payment of such Indebtedness or
obligation, (y) to maintain working capital or other balance sheet condition or
otherwise to advance or make available funds for the purchase or payment of
such Indebtedness or obligation, (iii) to lease property or to purchase
securities or other property or services primarily for the purpose of assuring
the owner of such Indebtedness or obligation of the ability of the primary
obligor to make payment of such Indebtedness or obligation, or (iv) otherwise
to assure the owner of the Indebtedness or obligation of the primary obligor
against loss in respect thereof, PROVIDED, HOWEVER, that the term "Guarantees"
shall not include (y) guarantees of completion unless and until a claim for
payment has been made thereunder, at which time such completion guarantee shall
be deemed Indebtedness to the extent of the claim, and (z) Low Income Housing
Credit Guarantees, unless and until a claim for payment is made thereunder. For
the purposes of any computations made under this Agreement, a Guarantee in
respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of the Indebtedness for borrowed
money which has been guaranteed, and a Guarantee in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness
equal to the maximum aggregate amount of such obligation, liability or
dividend.
(c) "CAPITALIZED LEASE OBLIGATIONS" shall mean all obligations
of the Company, the Operating Partnership or any Subsidiary under any capital
lease which under GAAP are required to be reflected as a liability on a
consolidated balance sheet of the Company.
(d) "LOW INCOME HOUSING CREDIT GUARANTEES" means assurances by
the Company or the Operating Partnership to limited partners of certain
affiliates of the Company that the properties developed and operated by such
affiliates will be kept in compliance with applicable provisions of the Code
to avoid loss or recapture of low income housing tax credits.
(e) "CURRENT MARKET PRICE" of the Common Stock as of any date
shall mean the average, for the 20 consecutive Trading Days preceding the date
of determination, of the last reported sales price, regular way on such day,
or, if no sale takes place on such day, the average of the reported closing bid
and asked prices on such day, regular way, in either case as reported on the
NYSE or, if such security is not listed or admitted for trading on the NYSE, on
the principal national securities exchange on which such security is listed or
admitted for trading or, if not listed or admitted for trading on any national
securities exchange, on the NASDAQ Stock Market ("NASDAQ"), National Market
System or, if such security is not quoted on such National Market System, the
average of the closing bid and asked prices on such day in the over-the-counter
market as reported by NASDAQ or, if bid and asked prices for such security on
such day shall not have been reported through NASDAQ, the average of the bid
and asked prices on such day as furnished by any NYSE member firm regularly
making a market in such security selected for such purpose by the Board of
Directors.
(f) "TOTAL MARKET CAPITALIZATION" as of any date shall mean
the sum of (1)(x) the Current Market Price multiplied by (y) the sum of (i) the
aggregate number of shares of Common Stock outstanding as of such date, plus
(ii) the aggregate number of common units of the Operating Partnership
outstanding as of such date not owned by the Company or any of its
Subsidiaries, plus (2)(x) the aggregate liquidation preference of all shares of
preferred stock of the Company outstanding as of such date, plus (y) the
aggregate liquidation preference of any preferred units of the Operating
Partnership outstanding as of such date not owned by the Company or any of its
Subsidiaries, plus (3) the aggregate of the items of outstanding indebtedness
of the Company set forth in items (i) through (iv), and (vi) of the definition
of "Indebtedness" above.
5.08 INCURRENCE COVENANT. The Company covenants and agrees
that, so long as any Shares remain outstanding, the ratio of EBITDA to Fixed
Charges in each calendar quarter shall be greater than 1.75 to 1.0. The
Company will provide each Purchaser with a certificate of its Chief Financial
Officer certifying the Company's compliance with this Section 5.08 within
thirty (30) days after each calendar quarter.
For the purpose of this Agreement:
(a) "EBITDA" means, for any period, the Consolidated
Businesses' earnings before giving effect to expenses for interest, taxes,
depreciation and amortization.
(b) "FIXED CHARGES" means with respect to any fixed period, the
sum of (1) Total Interest Expense; and (2) the aggregate of all dividends paid
or accrued on the Company's preferred stock.
(c) "CONSOLIDATED BUSINESSES" means the Company, the Operating
Partnership, and their Subsidiaries.
(d) "TOTAL INTEREST EXPENSE" means, for any period, the sum of:
(i) interest expense of the Consolidated Businesses paid during such period;
and (ii) interest expense of the Consolidated Businesses accrued and/or
capitalized for such period in each case including participating interest
expense, the amortization of loan fees, original issue discount, non-cash
interest payment, the interest component of Capitalized Lease Obligations and
hedging costs but excluding extraordinary interest expense, and net of
amortization of deferred costs associated with new financings or refinancings
of existing Indebtedness.
5.09. OPERATING PARTNERSHIP SECURITIES. Concurrent with the
Closing, the Company shall cause the Operating Partnership to issue to the
Company or one of its wholly owned Subsidiaries 300,000 Units with the
designations, preferences and other rights, terms and provisions set forth in
the OP Amendment attached as EXHIBIT F hereto, and the Company shall cause the
Operating Partnership to keep such Units outstanding and the Company (or its
Subsidiaries) shall continue to own such Units, for so long as the Shares are
outstanding, subject to redemption or conversion as provided for in the OP
Amendment. So long as any Units are outstanding, the Company shall not permit
the Operating Partnership to authorize, reclassify or create any securities of
any class or series or any security convertible into securities of any class or
series ranking prior to the Units in the distribution of assets upon any
liquidation, dissolution or winding up of the Operating Partnership or in the
payment of distributions except for the Class A Interest.
5.10. COMPANY TRANSACTIONS. Except as otherwise provided in
paragraph (b) of Section 6, the Company agrees that it shall not repurchase
any of the Shares except pursuant to an offer made on the same terms to the
holders of all outstanding Shares.
5.11. COMPLIANCE WITH LAWS. The Company shall comply and shall
cause each Subsidiary to comply with all applicable laws, rules, regulations
and orders, including, without limitation, the Occupational Safety and Health
Act of 1970, as amended, ERISA, the Americans with Disabilities Act of 1990, as
amended, and all Environmental Laws, noncompliance with which could reasonably
be expected to have a Material Adverse Effect.
5.12. RESTRICTIVE AGREEMENTS PROHIBITED. (a) Except as
described in Section 3.24, the Company will not enter into, become a party to,
allow to exist or adopt any contract, indenture, agreement or instrument, or
any note, debenture, bond or other security or enter into any amendment of any
provision of the Articles or Bylaws, containing provisions which would by its
terms restrict or limit the ability of the Company to pay the full amount of
the dividends on the Shares at the rates and on the dates fixed in the Series E
Articles Supplementary or which otherwise restrict the Company's performance of
this Agreement, the terms of the Shares or the Warrants; provided, that
covenants or other provisions requiring the maintenance of reasonable minimum
levels of shareholders' equity or net worth, cash flow, current assets and
similar items and agreements relating to the future issuance of preferred stock
on a parity with the Shares shall not be deemed to limit, impair or otherwise
modify the obligations of the Company to declare and pay dividends on the
Shares as and when the same are due and payable.
(b) Except as could not be reasonably expected to have a
Material Adverse Effect, the Company will not permit any Subsidiary to be a
party to or bound by any contract, indenture, agreement, instrument or any
note, debenture, bond or other security under the terms of which such
Subsidiary's right to declare and pay dividends or make other distributions on
or in respect of its capital stock is restricted; provided that covenants or
other provisions requiring the maintenance of reasonable minimum levels of
shareholders' equity or net worth, cash flow, current assets and similar items
shall not be deemed to limit, impair or otherwise modify the obligations of the
Subsidiaries to declare and pay dividends on capital stock as and when the same
are due and payable or to redeem shares of capital stock.
5.13. MAINTENANCE OF RATING OF THE SHARES. The Company
covenants and agrees that, so long as any Shares remain outstanding, the
Company shall maintain a rating on the Shares by at least one nationally
recognized statistical rating organization, including but not limited to Fitch
IBCA, Duff & Phelps Credit Rating Co.
5.14. INVESTMENT COMPANY STATUS. The Company covenants and
agrees that it will take no action which would require it to be registered as
an "investment company" within the meaning of the 1940 Act.
5.15. NOTICES. The Company agrees that it shall promptly
notify each of the Purchasers of: (i) the occurrence of any event or condition
that could reasonably be expected to have a Material Adverse Effect; (ii) any
material default under any material debt instrument or other material document;
and (iii) any additional rating or removal, cancellation or termination of the
rating on the Shares obtained by the Company.
Section 6. RESTRICTIONS ON TRANSFER.
(a) The Purchasers agree not to transfer, convey, assign,
pledge or hypothecate any of the Shares or the shares of Common Stock obtained
upon conversion of the Shares except in a transaction in compliance with
applicable securities laws.
(b) The Purchasers agree that they, together with the other
holders of the Shares, shall not sell more than 150,000 of the Shares to
any purchaser or group of affiliated purchasers (excluding sales to persons who
are Purchasers or affiliates of the Purchasers) without first offering to sell
such Shares to the Company. Such offer (the "OFFER") shall: (i) be in writing
(the "OFFER NOTICE"); (ii) specify the number of Shares proposed to be
transferred; and (iii) specify the proposed sale price for the Shares proposed
to be sold. Within ten (10) business days after the Company receives the Offer
Notice from the Purchaser(s), the Company shall notify the Purchaser(s) in
writing whether it irrevocably elects to purchase all, but not less than all,
such Shares on the terms of the Offer. If the Company shall have exercised its
right to purchase such Shares pursuant to this paragraph, then, within ten (10)
business days after delivery of notice of acceptance of the Offer by the
Company, at the offices of the Company or such other place as may be mutually
agreed upon, the Company shall pay the aggregate purchase price for the Shares
by wire transfer of immediately available funds to the account designated by
the Purchaser(s) and the Purchaser(s) shall deliver to the Company the
certificates representing such Shares free and clear of any liens, charges and
encumbrances, duly endorsed in blank, or accompanied by stock powers duly
executed in blank. If the Company does not give the Purchaser(s) such notice
of acceptance within such ten (10) business day period, then the Offer shall be
deemed to be rejected. If the Company rejects (or is deemed to reject) the
Offer, then during the next 90 days the Purchaser(s) shall be free to
consummate the transaction described in the Offer Notice at 95% of the price
set forth therein or a higher price; provided that if the Purchaser(s) do not
consummate such transaction within 90 days after the Company has (or is deemed
to have) rejected the Offer, then the provisions of this Section 6(b) shall
again apply to any sale, transfer or other disposition of any Shares.
As a condition to any sale, transfer or other disposition pursuant
to this Section 6, the Purchasers will obtain: (i) a representation from the
transferee that such transfer will not cause the transferee to exceed the
Company's Ownership Limit, as defined in the Articles; and (ii) an
acknowledgment by the transferee that such transferee acknowledges and agrees
to be subject to the agreement set forth in Section 19 of this Agreement.
Section 7. COMPANY REQUESTS FOR AN INCREASE IN SERIES E SHARES.
The Company may at any time request that the Purchasers approve an increase in
the number of Shares for purposes of selling such additional Shares to third
parties; PROVIDED, HOWEVER, that the Purchasers shall have no obligation,
express or implied, to approve such request.
Section 8. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties hereto contained in this
Agreement or otherwise made in writing in connection with the transactions
contemplated herein shall survive the making of this Agreement and sale of the
Shares, through and until the expiration of the applicable statute of
limitations with respect thereto.
Section 9. NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered by hand or overnight courier or sent
by first-class mail, postage pre-paid, or by telecopy, as follows:
Section If to the Purchaser(s):
The Prudential Insurance Company of America
c/o Prudential Real Estate Investors
8 Campus Drive, 4{th} Floor
Parsippany, New Jersey 07090
Attention: Marc R. Halle
Fax: (973) 734-1475
and
Teachers Insurance and Annuity Association of America
730 Third Avenue
8th Floor
New York, New York 10017
Attention: Andrew A. Duffy, Director
Fax: (212) 916-6960
with a copy to:
Clifford Chance Rogers & Wells, LLP
200 Park Avenue
New York, New York 10160
Attention: Jay L. Bernstein, Esq.
Fax: (212) 878-8375
and
If to the Company, at:
Home Properties of New York, Inc.
850 Clinton Square
Rochester, New York 14604
Attention: Amy L. Tait, Executive Vice President
Facsimile: (716) 546-5433
and
Home Properties of New York, Inc.
850 Clinton Square
Rochester, New York 14604
Attention: Ann M. McCormick, General Counsel
Facsimile: (716) 232-3147
or, in each case, at such address and to the attention of such person
as either party shall have furnished to the other by notice.
Section 10. ENTIRE AGREEMENT; AMENDMENTS.
This Agreement and the other Transaction Documents
constitute the entire understanding between the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and understandings
of the parties, whether oral or written. This Agreement may be modified or
terminated only by an instrument in writing signed by the Company and the
Purchasers holding 70% of the Shares then outstanding.
Section 11. SUCCESSORS AND ASSIGNS .
This Agreement shall be binding on and shall inure to the benefit of
the successors and assigns of the parties hereto and any assign and/or
successor of each Purchaser shall succeed to (and have the right to enforce)
all of such Purchaser's rights hereunder, except for the Ownership Waiver.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and
permitted assigns any rights, remedies, obligations, or liabilities under or by
reason of this Agreement.
Section 12. HEADINGS.
The headings of the sections of this Agreement are solely for
convenience of reference and shall not affect the meaning of any of the
provisions hereof.
Section 13. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, including, without limitation, Section 5-
1401 of the New York General Obligations Law, without giving effect to the
principles of conflicts of law; PROVIDED, HOWEVER, that matters relating to the
issuance of the Shares, the terms of the Shares and other internal corporate
matters relating to the Company shall be governed by the laws of the State of
Maryland. Each of the parties hereto irrevocably and unconditionally consents
to submit to the exclusive jurisdiction of the courts of the State of New York
and of the United States of America, in each case located in the County of New
York, for any action, proceeding or investigation in any court or before any
governmental authority ("LITIGATION") arising out of or relating to the
Transaction Documents and the transactions contemplated hereby and thereby, and
further agrees that service of any process, summons, notice or document by U.S.
Registered Mail to its respective address set forth in the Transaction
Documents shall be effective service of process for any Litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably
and unconditionally waives any objection to the laying of venue of any
Litigation arising out of the Transaction Documents or the transactions
contemplated hereby and thereby in the courts of the State of New York or the
United States of America, in each case located in the County of New York, and
hereby further irrevocably and unconditionally waives and agrees not to plead
or claim in any such court that any such Litigation brought in any such court
has been brought in an inconvenient forum. Each of the parties irrevocably and
unconditionally waives, to the fullest extent permitted by applicable law, any
and all rights to trial by jury in connection with any Litigation arising out
of or relating to the Transaction Documents or the transactions contemplated
hereby and thereby.
Section 14. COUNTERPARTS.
This Agreement may be executed in one or more separate counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
Section 15. ISSUANCE AND OTHER TAXES.
The Company shall pay or cause to be paid all stamp, stamp duty,
stamp duty reserve, documentary, registration, transfer or similar taxes
required to be paid in connection with the issuance and sale to the Purchasers
of the Shares and the issuance of the Warrants, and shall cause all appropriate
stock transfer tax stamps to be affixed to the certificates representing the
Shares and Warrants so sold and delivered. The Company shall file,
independently or jointly with each Purchaser, as the law requires, all transfer
tax filings required to be filed by it in connection with the sale and delivery
to such Purchaser of the Shares and Warrants.
Section 16. NO DELAY, WAIVER.
No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any waiver on
the part of any party of any such right, power or privilege, preclude any
further exercise thereof or the exercise of any other such right, power or
privilege. Any waiver or consent by the Purchasers that can be given hereunder
shall require the consent of the Purchasers holding 70% of the Shares then
outstanding.
Section 17. SEVERABILITY.
If any provision of this Agreement, or the application of any such
provision to any person or circumstance, shall be held invalid by a court of
competent jurisdiction, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those as to which it is
held invalid, shall not be affected thereby.
Section 18. LOST, ETC. CERTIFICATES.
Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any certificate representing any of the
Shares and, in case of any such loss, theft or destruction, upon delivery of
indemnity satisfactory to the Company, or in case of any such mutilation, upon
surrender and cancellation of such certificate, the Company will at its expense
make and deliver a new certificate, of like tenor, in lieu of such lost,
stolen, destroyed or mutilated certificate. Upon surrender of any certificate
representing any of the Shares to the Company at its principal office, the
Company at its expense will issue in exchange therefor and deliver to the
holder of the surrendered certificate a new certificate or certificates, in
such denomination or denominations as may be requested by such holder.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first above-written.
HOME PROPERTIES OF NEW YORK, INC.
By: /s/ David P. Gardner
Name: David P. Gardner
Title: Senior Vice President
HOME PROPERTIES OF NEW YORK, L.P.
By: Home Properties of New York, Inc.,
its General Partner
/s/ David P. Gardner
Name: David P. Gardner
Title: Senior Vice President
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By: ________________________________
Name: ________________________________
Title: ________________________________
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By: ________________________________
Name: ________________________________
Title: ________________________________
<PAGE>
EXHIBITS
Exhibit A Form of Series E Articles Supplementary
Exhibit B Form of Tax Counsel Opinion
Exhibit C Form of Legal Counsel Opinion
Exhibit D Form of General Counsel Opinion
Exhibit E Form of Ownership Waiver
Exhibit F Form of Amendment to the Second Amended and Restated
Agreement of Limited Partnership
Exhibit G Form of Fitch IBCA Duff & Phelps Rating Letter
Exhibit H Form of Officers Certificate
Exhibit I Form of Warrants
Exhibit J Press Release
SCHEDULES
Schedule 3.1(b) Schedule of Subsidiaries
Schedule 3.8 Schedule of Outstanding Options, Warrants, Rights or
Other Securities of the Company or the Operating
Partnership
Schedule 3.10 Schedule of Certain Liabilities
Schedule 3.13 Schedule of Litigation
Schedule 3.16 Schedule of Federal and State Income Tax Audits
Schedule 3.17 Schedule of Insurance
Schedule 3.18 Schedule of Benefit Plans
Schedule 3.22 Schedule of Affiliate Transactions
Schedule 3.23 Schedule of Disclosure Documents
